If you’re suggesting a deflationary indicator that’s a horrible thing. Deflation was what we had in the great depression, money is worth a lot as prices tank so you end up earning very few dollars (i.e. salaries compress as prices compress) but debts stay the same. So if you owe $200K on a good low fixed rate mortgage and your salary tanks from $150K/year to $50K you can still afford the now much cheaper clothes and groceries still but have no hope of keeping up that unchanging mortgage payment every month. Or student loan payments. Or credit card payments. Borrowers get destroyed by deflation, and so do lenders who simply cannot get paid. And not irresponsible borrowers, mind you, but people who bought a home at a then reasonable cost to raise their family in. They end up losing it if the currency deflates.
I am not suggesting anything. I was trying to give a basic description of what was going on.
I have no idea what’s going to happen next year. But no one seems to be looking forward to it.
And not irresponsible borrowers, mind you, but people who bought a home at a then reasonable cost to raise their family in. They end up losing it if the currency deflates.
—
Wouldn’t a fixed loan interest rate payment stay the same?